operations Management

Project network diagram

A diagram showing logical relationships and dependencies between activities, using nodes and arrows.

Define path in network analysis

A path is a sequence of connected activities from start to finish in a network

Define event in network analysis

An event is a specific point in time marking the start or completion of an activity (not the activity itself)

Node

An indicator of an event

Predecessors

Activities that must be completed before another activity can begin

Successors

Activities that follow after a specific activity is completed

Early start date (ES)

A calculation of the earliest an activity can take place without delaying the rest of the project

Late start date (LS)

A calculation of the latest an activity can take place without delaying the rest of the project

Forward pass

Calculations determining the earliest start and end date of an activity

Backward pass

Calculations determining the latest start and end date of an unfinished activity

Merge activity

When two or more activities can be completed at the same time

Burst activity

When two or more activities can be completed after a prior activity

Float

A time allowance for which the activity must be completed within to avoid delaying the end date

What is the purpose of calculating a float

Float , allows for slack time and helps identify the critical path (activities with zero float) and provides scheduling flexibility

Certain decisions

Made using only known information

Competitive decisions

Decisions where outcomes depend on others choices

Uncertain decisions

Values & probability distribution of scenario unknown (e.g. Demand for new product)

Risky decisions

Values & probabilities unknown (e.g. Demand for old product with history)

Decision making process

Define problem

Identity alternatives

Determine decision criteria

Evaluate alternatives using criteria

Choose alternatives

Pay-offs

Outcome resulting from a specific decision alternative of a particular state of nature

Maximax

Determine best possible payoff

Find Max payoff of each row & choose highest

Maximin

‘Best worst alternative’

Find min of each row & choose the maximum

Laplace

Determine average payoff for each row, choose best

Add all payoffs per row / 3 (no° payoffs)

Minimax regret

Identify regret (best payoff under any state of nature) - (actual payoff under same state of nature) choose alternative with smallest max (best worst) regret

1. Find best payoff in each column

2. Best now = 0, minus number from rest in column

3. Identify the maximum from each column and choose the lowest

Hurwicz

Select coefficient of optimism (1), unoptimistic = Se option with highest hurwicz payoff

H = a x (maximum payoff) + ( 1-a) x (minimum payoff)

Choose highest number

Criticisms of decision making under uncertainty

Most rules are irrational as they ignore most information on payoff table

EXECPT Laplace, uses all numbers by averaging

Minimax ignores most data & focuses on worst case scenario = most risky

Expected monetary value (EMV)

Measures the average expected payoff of each decision

EMV = (payoff x probability)

1. Multiply payoff by corresponding probability

2. Do this for each row (low med high)

Expected Opportunity Loss (EOL)

Measures regret - loss from not choosing the best option in each state

1. Find lowest EOL

1. Find highest payoff

2. Subtract payoff from the maximum

3. Multiply each regret by probability

4. Sum weighted regrets

Expected Value of Perfect Information (EVPI)

Measures how much willingness to pay for perfect information about the future

EVPI = (best payoff under in each state) x probability

EPPP = Best payoff of each row x each probability added together E.g. 0…(..) + 0…(..) +0…(…) =

Then EVPI = EPPP- EMV

Break-even analysis definition

Addresses decision whether to make or buy a product, monetary point at which a firm must operate at to profit

Fixed costs

Costs that exist when no units are produced (e.g. rent, depreciation, mortgage, debt, etc)

Variable costs

Costs that vary with volume (e.g. packaging, materials, labour, energy)

Contribution

The amount the company pays to produce a good (S-V)

Revenue function

Increases by sales price per unit

Total cost

Fixed + variable costs

Break-even point on graph

Area between revenue and total cost line

Revenue above BEP

Profit

Revenue below BEP

Loss

BEP formula 1 single product

B = F / (S-V)

BEP formula 2 multi product

BEP = F ((S1Q1 + S2Q2)/(S1-V1)Q1 + (S2 - V2) Q2)

1. Determine forecasted revenue (S x Q) for each product

2. Determine contribution (S-V) for each product

3. Calculate forecasted contribution ((S-V)Q)

4. Calculate BEP

5. Forecasted P/L

Circular economy stages

1. Recycling

2. Design

3. Production

4. Distribution

5. Composition resume repair

6. Collection

7. - residual waste thrown

8. Repeat

Linear economy stages

1. Natural resources

2. Take

3. Make

4. Dispose

5. Waste

Circular economy definition

How companies are rethinking their business models & commercial framework to capture value from circular approaches such as new product or circular flow

Characteristics of products from circular economy

1. Durable

2. Repairable

3. Shareable

4. Easy to disassemble & recycle